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What is meant by actual VAT taxation?

The so-called actual taxation (§ 20 UStG) represents a legal exception to the principle of debit taxation and serves, among other things, to avoid burdening smaller companies with the pre-financing of VAT.

As a rule, VAT is calculated on the basis of agreed charges (debit taxation, § 16 Para. 1 UStG), i.e. VAT is incurred at the end of the pre-notification period (month/quarter) in which the delivery or other service was carried out. VAT must then be declared and paid for this pre-notification period, regardless of when the invoice is issued or the customer pays. However, if you receive advance payments before the service is performed, you must pay tax on these in the pre-notification period in which they are received.

In the case of actual taxation, the VAT arises at the end of the pre-notification period in which the payments were received. In this case, you only have to declare and pay the VAT when your customer has actually paid.

Please note that the use of actual taxation is subject to application and requires approval from the tax office. Your application for actual taxation can generally be approved if one of the conditions specified in § 20 UStG is met.

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